Exhibit 4.2
THIS PROMISSORY NOTE AND THE SHARES ISSUABLE UPON CONVERSION OF THIS NOTE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS (COLLECTIVELY, THE ACTS), AND THIS NOTE MAY
NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACTS OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
RENTECH, INC.
Convertible Promissory Note
$_________ Denver, Colorado
February 25, 2002
RENTECH, INC., a Colorado corporation (the "Company"), for value
received, hereby promises to pay to __________________________________
______________________________________, organized under the laws of the
state of _______________ (the "Holder"), the principal sum of
______________________________ Dollars and no/100 ($____________),
together with interest on the unpaid principal balance at the rate of
eight and one-half percent (8.5%) per annum from the date of this Note
until paid. This Note shall be payable in equal monthly installments of
___________________________________________ ($_______________)
consisting of principal and interest. Payments shall be made to Holder
at _______________ ______________________________ in monthly
installments commencing on April 1, 2002, and continuing monthly
thereafter on the first day of each succeeding month until this Note is
paid in full through these monthly payments of money or through a
ombination of such payments and the conversion of principal amounts of
this Note into shares of the Company's common stock, as subsequently
provided in this Note. If not sooner paid, the entire unpaid balance of
principal and interest shall be paid in full on February 25, 2006.
1. Conversion into Common Stock. In addition to the monthly
installments of payments in money, as previously described, principal
amounts of this Note shall be converted into duly authorized, validly
issued, fully paid and non-assessable shares of the Company's common
stock as subsequently provided in this Agreement ("Conversion Shares").
Notwithstanding any provisions of this Note to the contrary, the total
number of shares issued by the Company for the conversions subsequently
described shall not exceed _____________________________________
(_____________) shares less two shares for every dollar of principal
reduction of the Note paid in the form of money.
1.1 Definition of Market Price and Conversion Price.
(a) For purposes of this Note, the "Market Price" means
the closing price of the common stock on the American Stock Exchange for
the day on which the Company receives Holder's written notice of
conversion. If the common stock is not listed on that market, the
Market Price shall be the closing or the average of the last reported
bid and asked price reported by the National Association of Securities
Dealers Quotation System (or, if the price is not quoted on NASDAQ, by
the National Quotation Bureau, Inc.) or any other national securities
exchange with unlisted trading privileges. If the common stock is not
listed or admitted to unlisted trading privileges on a national
securities exchange, the Market Price shall be determined by a
nationally recognized investment banking or appraisal firm (the
"Appraiser") mutually acceptable to the Company and the Holder. If
Company and Holder do not agree on the Appraiser, the Appraiser shall be
selected by the Presiding Judge of the District Court of Multnomah
County, Oregon. The price determined in this manner shall be final and
binding.
(b) For purposes of this Note, the "Conversion Price"
means the price per share at which the indebtedness is converted into
Conversion Shares.
(c) For purposes of this Note, the "Conversion Date" is
the date on which the Holder sends the Conversion Notice (as defined in
Section 1.5 below) to the Company.
1.2 Conversion During First Year. Until the first anniversary
date of this Note, Holder may elect to convert part or all of the
principal balance into common stock at a Conversion Price of $.50 per
share if the Market Price is $.50 per share or higher. Conversion is
not permitted during the first year if the Market Price on the
Conversion Date is less than $.50 per share.
1.3 Conversion After First Year. At any time following the
first anniversary date of this Note, Holder may elect to convert part or
all of the principal balance into common stock of the Company at a
Conversion Price of $.50 per share; provided, however, no conversion
shall be made if the Market Price is less than $.50 per share on the
Conversion Date.
1.4 Automatic Conversion. Starting on the first day of the
thirteenth calendar month following the date of this Note, and continuing
on the first day of each succeeding calendar month until the Note is
paid in full by a combination of the monthly payments in money and the
conversion of indebtedness into common stock, principal in the amount of
one-thirty-sixth of the declining principal balance of the Note shall
automatically convert into the Company's common stock at a Conversion
Price of $.50 per share. If the average daily Market Price for the
seven trading days preceding the first day of such calendar month is
less than $.50 per share, the difference between $.50 per share and the
average daily Market Price for the seven trading days preceding the date
of conversion shall be determined and that dollar amount shall be
multiplied by the number of shares issued to the Holder as a result of
the conversion, and the resulting dollar amount shall be added to the
current principal balance of the Note.
1.5 Holder's Election to Convert. To carry out an election by
it to convert indebtedness into common shares of the Company, the Holder
must transmit a written request (the "Conversion Notice") to the Company
requesting conversion of that part of the indebtedness that is allowed
by the previous provisions of this Section. No Conversion Notice or
other notice of conversion shall be required of the Company with respect
to the automatic conversions described in Section 1.4.
1.6 Issuance of Stock Certificates. After each conversion,
whether at the written request of the Holder or an automatic conversion
as previously described, the Company shall issue its restricted stock
certificates representing the Conversion Shares to the Holder, as
promptly as practical. The Company will issue the certificates in
accordance with Rule 144 promulgated by the Securities and Exchange
Commission ((SEC() under authority of the Securities Act of 1933, as
amended, and will cause the stock certificates to be delivered to Holder
in its name at its address on the Company's records.
2. Prepayment. The Company may prepay this Note, in whole or in
part, by payments of money, from time to time, without premium or
penalty of any kind; provided, however, (i) a prepayment may be made
only if the Market Price is then $.50 or more, (ii) no prepayment may be
made and no notice of prepayment may be given by the Company until the
registration, described in Section 4.1 of this Note, of the Conversion
Shares has been declared effective by the SEC, and (iii) no more than
one-half of the original principal balance of the Note may be prepaid
during the first year following the date of this Note. Notice of
prepayment shall be given by the Company in writing, mailed not less
than ten (10) days prior to the date fixed for prepayment. The notice
shall be mailed by certified mail, return receipt requested, to the
Holder at its address of record or such address as it may from time to
time furnish to the Company in writing. The notice shall specify the
date fixed for prepayment and the amount to be prepaid. The prepayment
shall be applied first to accrued and unpaid interest and the balance,
if any, to principal. If this Note is called for prepayment, the Holder
shall have the right to convert the outstanding balance of principal and
interest of this Note into common stock of the Company as if the Note
had not been called for prepayment, at any time up to and including, but
not after, the date fixed for its prepayment, or if such date be a
Saturday, Sunday or legal holiday, on the next succeeding business day,
but not thereafter. If the Company defaults in the payment of any
prepayment amount as to which it has given notice, the Holder may revoke
any conversion election it made based on that notice. The Conversion
Price at which the outstanding balance of principal and interest is
converted into Conversion Shares shall be $0.50.
3. Transfers of Note to Comply with the Securities Laws. The
Holder agrees that this Note may not be sold, pledged, hypothecated,
converted, or otherwise disposed of except by succession of law, and
then only in compliance with federal and applicable state securities
laws.
4 Registration Rights.
4.1 Filing Registration Statement. Within forty-five (45)
days from the date of this Note, the Company will file its registration
statement with the SEC registering for resale all Conversion Shares
issued or that may be issued to Holder in accordance with the provisions
of this Note, or in exchange or replacement for such shares (the
(Required Filing Date(). The Company shall use its best efforts to
cause the registration statement to be declared effective as soon as
possible, but in no event later than the earlier of the date which is (i)
three days after the date the SEC provides notice that it may be
declared effective, or (ii) one hundred twenty (120) days from the date
of this Note (the "Effective Date"). The Company shall use its best
efforts to cause all of the Conversion Shares to be acquired upon
conversion of this Note to be registered under the Securities Act of
1933, as amended (the Act). If at any time the number of shares of
common stock issuable upon conversion of this Note exceeds the aggregate
number of shares of common stock then registered, the Company shall
promptly either file with the SEC an amendment to or an additional
registration statement to cover such shares. If the registration
statement covering the shares issuable upon conversion of this Note is
not filed by the Required Filing Date, Holder may deem the Company to be
in default under this Note and the Holder may charge the Company the
amount of $200,000 as liquidated damages, which election will not limit
any other rights or remedies that Holder may have at law or under this
Agreement. The parties estimate that the amount of the liquidated
damages for failure to timely file the registration statement with the
SEC on or before the Required Filing Date to be a reasonable estimate of
the damages incurred by Holder for such failure.
4.2 Company's Undertakings. In furtherance of its undertaking
to register the Conversion Shares to be issued in accordance with the
terms of this Note, the Company will:
(a) Prepare and file with the SEC a registration
statement with respect to such common stock and cause the registration
statement to become and remain effective until the date that the Holder
no longer owns any of the shares acquired under this Note or any right
to acquire shares of common stock upon conversion of this Note;
provided, however, the registration statement will not be kept
effective, in any event, after all rights to acquire shares have
terminated and the last of the shares that have been acquired are
eligible for resale without restriction under the provisions of Rule
144(k).
(b) Prepare and file with the SEC such amendments and
supplements to the registration statement and the prospectus used in
connection with the registration statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holder such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as Holder may
reasonably request in order to facilitate the disposition of the
Conversion Shares owned by it.
(d) Register or qualify the securities covered by the
registration statement under such other securities or blue-sky laws of
the jurisdictions that are reasonably appropriate for the distribution
of the securities covered by the registration statement, provided that
the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent
to service of process in any state or jurisdiction, and further
provided, that (anything in this Section 4.2(d) to the contrary
notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the securities are qualified requires that
expenses incurred in connection with the qualification of the securities
in that jurisdiction be borne by selling shareholders pro rata, to the
extent required by such jurisdiction.
(e) Maintain listing of shares subject to registration
hereunder on the American Stock Exchange or, in the event such listing
is cancelled, to secure authorization and quotation of the shares for
trading on the Nasdaq OTC Bulletin Board and to arrange for at least
three market makers in the stock.
(f) With a view to making available to Holder the
benefits of Rule 144 (or its successor), the Company will make and keep
available at all times public information as those terms are defined
under Rule 144, file in a timely manner all reports and other documents
required by the Company under the Securities Act of 1933 and the
Securities Exchange Act of 1934, and furnish to the Holder upon request
a written statement by the Company that it has complied with the
reporting requirements of Rule 144 and such further information as may
be reasonably requested by Holder.
4.3 Holder's Information. It shall be a condition precedent
to the obligations to the Company to take any action that the Holder
hall furnish to the Company such information regarding it, the
Conversion Shares held by it, and the intended method of disposition of
those securities as the Company reasonably requests and as is required
in connection with the action to be taken by the Company.
4.4 Expenses of Registration. The Company shall bear all
registration and qualification fees and expenses (excluding
underwriter's discounts, commissions and expenses), and any additional
costs and disbursements of counsel for the Company in connection with
the registration.
4.5 No Action to Delay Registration. No Holder shall have any
right to take any action to restrain, enjoin, or otherwise delay any
registration as the result of any controversy that might arise with
respect to the interpretation or implementation of this Section 4.
4.6 Indemnification.
(a) To the extent permitted by law, the Company will
indemnify and hold harmless the Holder, any underwriter (as defined in
the Act) for it, and each such person, if any, who controls the Holder
or underwriter within the meaning of the Act, against any losses,
claims, damages, or liabilities, joint or several, to which they may
become subject under the Act or otherwise, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based on any untrue or alleged untrue statement of any
material fact contained in the registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state in it a material fact required to
be stated in it, or necessary to make the statements in it not
misleading. The Company will also, to the extent permitted by law,
reimburse the Holder, the underwriter, or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any loss, claim, damage, liability, or action
indemnified against; provided, however, that the indemnity agreement
contained in this Section 4.6 shall not apply to amounts paid in
settlement of any loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in
any case for any loss, claim, damage, liability, or action to the extent
that it arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in connection with
the registration statement, preliminary prospectus, final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity
with written information furnished expressly for use in connection with
the registration by the Holder, underwriter, or controlling person, or
any of them.
(b) To the extent permitted by law, any Holder requesting
or joining in a registration will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
registration statement, each person, if any, who controls the Company
within the meaning of the Act, and each agent and any underwriter for the
Company (within the meaning of the Act) against any losses, claims,
damages, or liabilities to which the Company or any such director,
officer, controlling person, agent, or underwriter may become subject,
under the Act or otherwise, insofar as the losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based
upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or
alleged omission to state in it a material fact required to be stated in
it or necessary to make the statements in it not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
registration statement, preliminary or final prospectus, or amendments
or supplements thereto, in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will reimburse any legal or
other expenses reasonably incurred by the Company or any such director,
officer, controlling person, agent, or underwriter in connection with
investigating or defending any such loss, claim, damage, liability, or
action. The indemnity agreement contained in this Section 4.6 shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if the settlement is effected without the consent
of the Holder (which consent shall not be unreasonably withheld)
(c) Promptly after receipt by an indemnified party under
this Section 4.6 of notice of the commencement of any action, the
indemnified party will, if a claim relating to the notice is to be made
against any indemnifying party under this paragraph, notify the
indemnifying party in writing of the commencement of the action. The
indemnifying party will have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to its ability to defend such action, shall relieve the
indemnifying party of any liability to the indemnified party under this
paragraph, but the omission to so notify the indemnifying party will not
relieve it of any liability that it may have to any indemnified party
otherwise than under this paragraph.
4.7 No Further Obligations. The Company shall have no
obligations pursuant to this Section 4 after the due date of this Note.
5. Representations of the Company. The Company represents and
warrants to the Holder as of the date hereof that:
5.1 Corporate Existence. The Company: (i) is a corporation
duly organized, validly existing and in good standing under the laws of
the state of Colorado; (ii) has the power and authority to carry on its
business as now conducted and to own or hold under lease the properties
it purports to own or hold under lease; and (iii) is duly qualified,
licensed or registered to transact its business in each jurisdiction in
which failure to be so qualified, licensed or registered could or would
have a material adverse effect on its business, assets, operations or
financial condition.
5.2 Corporate Authority. The Company has all requisite
power and authority to execute and deliver this Note and to perform its
bligations hereunder. This Note has been specifically approved and
issued pursuant to the authorization of the Board of Directors and
constitutes the valid and binding obligation of the Company enforceable
against it in accordance with its terms.
5.3 No Obligation Contravened. The execution, delivery and
performance by the Company of this Note and the performance by the
Company of its obligations hereunder do not and will not contravene or
constitute a default under, or give rise to a right of termination,
cancellation or acceleration of any right or obligation of the Company
under any provision of applicable law or regulation or of any agreement,
judgment, injunction, order, decree or other instrument binding on the
Company and, except as contemplated in this Note, will not result in the
imposition of any lien on any asset of the Company.
5.4 Enforceability of Note. There is not pending, nor to the
knowledge of the Company is there now threatened, any judicial,
administrative, or arbitrable action, claim, suit, proceeding or
investigation or other controversy which might affect the validity or
enforceability of this Note or any action taken or to be taken in
connection herewith or which, if adversely determined, would have a
material and adverse effect on the Company or its business, assets,
operations or financial condition.
6. Events of Default. This Note shall become due and payable upon
written demand made by the Holder hereof if one or more of the following
events, herein called "events of default," shall occur and is not cured
within thirty (30) days after the Company has received written notice
from the Holder asserting that an event of default has occurred and
specifying in detail the facts that are claimed to be an event of
default:
6.1 Default in Payment. Default in Company's obligation to
make any payment required under this Note, when and as they become due
and payable;
6.2 Other Obligations. Failure of the Company to perform any
of its obligations specified in this Note other than a payment default;
provided, however, if any failure, other than a failure to pay money, is
curable, it may be cured and no event of default will have occurred, if
the Company, after receiving written notice from Lender specifying the
events alleged to constitute a default: (a) cures the failure within
thirty (30) days; or (b) if the cure requires more than thirty (30)
days, immediately initiates steps sufficient to cure the failure and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance within ninety (90) days after notice is
received.
6.3 Late Charge. If the Company defaults in any payment
obligation under this Note for a period in excess of fifteen (15) days,
it shall pay a late payment charge equal to five percent (5%) of the
amount not timely paid.
In case any one or more of the events of default specified above
shall occur and are continuing after the written notice has been given
to the Company as previously required and the Company has not cured the
event of default within the time previously described, the Holder may
proceed to protect and enforce its right by suit for the specific
performance of any covenant or agreement contained in this Note or may
proceed to enforce the payment of this Note.
7. Miscellaneous.
7.1 Ownership. The Company may consider and treat the person
in whose name this Note is registered as the absolute owner thereof for
all purposes whatsoever (whether or not payment of this Note is overdue)
and the Company shall not be affected by any notice to the contrary.
This Note shall be registered on the books of the Company as to both
principal and interest. The transfer of the Note may be effected only
by the Holder, or by transfer by operation of law, if accompanied by
evidence satisfactory to the Company substantiating the transfer.
Communications sent to the registered Holder shall be effective as
against all Holders or transferees of the Note who are not registered on
the Company's books at the time of sending the communications regarding
transfer.
7.2 No Shareholder Rights. The Holder shall not, by virtue of
this Note, be entitled to any rights of a shareholder in the Company,
either at law or in equity, and the rights of the Holder are limited to
those expressed in this Note.
7.3 No Individual Recourse. No recourse shall be had for the
payment of the principal or interest of this Note against any
incorporator or any past, present, or future stockholder, officer,
director, employee, or agent of the Company or of any successor
corporation, either directly or through the Company or any successor
corporation, all such liability of the incorporators, stockholders,
officers, directors, employees, and agents being hereby waived,
released, and surrendered by the Holder hereof by the acceptance of this
Note.
7.4 Effect. This Note shall be binding upon, and enforceable
by and against the Company, and its permitted successors and assigns.
7.5 Collection; Attorneys Fees. In the event this Note is
placed in the hands of an attorney for collection following the
occurrence of an event of default, the Company agrees to pay all costs of
collection incurred by the Holder including reasonable attorneys' fees
and costs even if a lawsuit is not filed. In the event the maturity of
the Notes is accelerated as provided in this Note as a result of
the occurrence of an event of default, then after written notice by
Holder o the Company demanding payment, this Note shall thereafter bear
interest at the rate of 14% per annum until the event of default is
waived or cured. In any litigation arising out of the terms of this
Agreement, the prevailing party shall be entitled to recover reasonable
attorneys fees at trial and on any appeal.
8. Choice of Law; Jurisdiction. THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
OREGON, WITHOUT REFERENCE TO ITS RULES RELATING TO CONFLICTS OF LAW. THE
HOLDER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE STATE
AND FEDERAL COURTS LOCATED IN THE CITY OF PORTLAND, COUNTY OF MULTNOMAH,
OREGON, AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON
IT IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
RELATIONSHIP BETWEEN HOLDER AND THE COMPANY BY ANY MEANS ALLOWED UNDER
STATE OR FEDERAL LAW. ANY LEGAL PROCEEDING ARISING OUT OF OR IN ANY WAY
RELATED TO THIS NOTE OR ANY OTHER RELATIONSHIP BETWEEN HOLDER AND THE
COMPANY SHALL BE BROUGHT AND LITIGATED EXCLUSIVELY IN ANY ONE OF THE
STATE OR FEDERAL COURTS LOCATED IN THE CITY AND COUNTY OF DENVER,
COLORADO HAVING JURISDICTION UNLESS THE COMPANY SHALL ELECT OTHERWISE.
THE HOLDER AND THE COMPANY HEREBY WAIVE ANY CLAIM, AND AGREE NOT TO
ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY SUCH
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT SUCH VENUE IS
IMPROPER.
9. Notices. All notices, requests, and other communications
hereunder shall be in writing and shall be delivered by courier or other
means of personal service (including by means of a nationally recognized
courier service or professional messenger service); or sent by facsimile
or mailed first class, postage prepaid, by certified mail, return
receipt requested; in all cases, addressed to each party at the
following address. All notices, requests, and other communications
shall be deemed given on the date of actual receipt or delivery as
evidenced by written receipt, acknowledgment, or other evidence of
actual receipt or delivery to the address specified above. Notice sent
by facsimile shall be deemed given on the date printed by the sender's
facsimile machine confirming receipt of the facsimile by the other
party's facsimile machine. Any party hereto may from time to time, by
notice in writing served as set forth previously, designate a different
address or a different or additional person to which all such notices or
communications thereafter are to be given.
Company: Holder:
Rentech, Inc.
1331 17th Street, Suite 720
Denver, Colorado 80202
10. No Third-Party Beneficiaries. This Agreement does not create,
and shall not be construed as creating, any rights enforceable by any
person not a party to this Agreement.
11. Entire Agreement. This Agreement (including any exhibits
hereto) and the agreements, documents, and instruments to be signed and
delivered pursuant hereto or thereto, embodies the final, complete and
exclusive agreement among the parties with respect to the subject matter
of this Agreement and related transactions; supersedes all prior
agreements, understandings, and representations, written or oral, with
respect thereto; and may not be contradicted by evidence of any such
prior or contemporaneous agreement, understanding, or representation,
whether written or oral. No change or modification to this Agreement
shall be valid unless in writing and signed by the parties hereto.
RENTECH, INC.
ATTEST:
By:
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